Comments on: Why the personal consumption data is important to the stock market http://www.creditwritedowns.com/2009/06/why-the-personal-consumption-data-is-important-to-the-stock-market.html Finance, Economics and Markets Fri, 10 Feb 2012 00:37:00 +0000 hourly 1 By: Matthew Phan http://www.creditwritedowns.com/2009/06/why-the-personal-consumption-data-is-important-to-the-stock-market.html#comment-56520 Matthew Phan Wed, 03 Jun 2009 08:50:00 +0000 http://www.creditwritedowns.com/?p=8901#comment-56520 hi Ed, thanks for the last 2 posts on Richard Koo. You're one of the few I've seen who have highlighted his work. I recently finished Holy Grail, which you cited, and was quite taken by his analysis (really like how he synthesises the fiscal-monetary debate). However: (i) I thought he skimmed over the Jap banking problem too quickly, by attributing the problems entirely to lack of demand for funds, without addressing to what extent a zombie banking sector held back recovery (except for a bit of data showing low bank interest rates and anemic loan growth even among foreign banks, which theoretically could have stepped in to fill the gap left by zombie dom banks if loan demand had been strong). (ii) Also, I was disturbed by his conclusion that the best thing the govt can do is borrow like mad, to replace corporate/household borrowing. Its certainly coming back to haunt Japan now, with debt at nearly 200% of GDP. (iii) finally i'm not sure how applicable the Jap policy measures are to the US now (though i think the analysis is applicable), as Koo argues that it was corp BS that got destroyed in Japan, while Jap households were able to draw down past years of savings to keep up consumption. In the US its households that have horrible BS, I'm not so sure about corporates. I'm just wondering what you think of these points, and how much you agree with Koo's analysis, because I haven't seen much discussion of his work. (or perhaps I'm not looking in the right places.) matthew hi Ed, thanks for the last 2 posts on Richard Koo. You’re one of the few I’ve seen who have highlighted his work. I recently finished Holy Grail, which you cited, and was quite taken by his analysis (really like how he synthesises the fiscal-monetary debate). However:
(i) I thought he skimmed over the Jap banking problem too quickly, by attributing the problems entirely to lack of demand for funds, without addressing to what extent a zombie banking sector held back recovery (except for a bit of data showing low bank interest rates and anemic loan growth even among foreign banks, which theoretically could have stepped in to fill the gap left by zombie dom banks if loan demand had been strong). (ii) Also, I was disturbed by his conclusion that the best thing the govt can do is borrow like mad, to replace corporate/household borrowing. Its certainly coming back to haunt Japan now, with debt at nearly 200% of GDP.
(iii) finally i’m not sure how applicable the Jap policy measures are to the US now (though i think the analysis is applicable), as Koo argues that it was corp BS that got destroyed in Japan, while Jap households were able to draw down past years of savings to keep up consumption. In the US its households that have horrible BS, I’m not so sure about corporates.

I’m just wondering what you think of these points, and how much you agree with Koo’s analysis, because I haven’t seen much discussion of his work. (or perhaps I’m not looking in the right places.)

matthew

]]> By: kfizzle http://www.creditwritedowns.com/2009/06/why-the-personal-consumption-data-is-important-to-the-stock-market.html#comment-56514 kfizzle Wed, 03 Jun 2009 01:11:00 +0000 http://www.creditwritedowns.com/?p=8901#comment-56514 Great post Ed. Great post Ed.

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